Black Gas

Maninder Dabas / FG

India

Mar 01, 2013

The government of India’s decision to increase the cap on subsidised cylinders from six to nine was indeed a breather, and it has given the poor some respite. Gurgaon has a population of about 20 lakhs, and almost all of them, even those living in ghettos, use LPG to cook their meals. However, Gurgaon has only around 3.2 lakhs LPG connections, supplied by 25 gas agencies. Quite a few buy their fuel from the ‘open market’, or to be precise ‘the black market’. Black marketing of fuel is not an alien phenomenon, as it has existed in our culture for decades. “The population is increasing at a rapid pace and we have limited resources, so it’s obvious that people will have to pay more, even to maintain their current levels. LPG is a part of our life. In a city like Gurgaon, which has a large floating population, black marketing will obviously see a rise, as people don’t want to take permanent connections. Since most of them earn well, people like us are making good money. Those who have connections get an LPG cylinder at the subsidised rate of Rs. 416, and this amount reaches to around Rs. 750 once a customer crosses the limit of the entitlement of nine subsidised cylinders,” said a gas agency owner. In Gurgaon, the illegal sale of cylinders is fast turning into an organised crime. Many residents who don’t have an LPG connection, or are in an urgent need of a cylinder, are availing of the facility, by just making a call to the local delivery agent. Within hours the cylinder is delivered at their doorstep, at three times the market price.

A delivery agent of a prominent gas agency in ‘Old’ Gurgaon narrated the modus operandi of the LPG black marketeers. The LPG black market thrives on the smaller capacity cylinders (4 kg). The LPG in the cylinders is sold for Rs.100 to Rs.110 per kg. Those rerouting the cylinders make a profit of Rs.4 per kg. “Big risk is involved in selling the cylinders directly to the customer at thrice the market price, and that’s why we sell it to known sub-brokers who have hidden godowns to stock the cylinders. The cylinders are then sold to known black market retailers, from where customers get their stock,” he informed. According to him, the sub-brokers pay anywhere between Rs.800 to Rs.900 per cylinder. The rate also depends on the size and availability of the stock. “If the company is not supplying cylinders to us on a regular basis, the rate will increase; and if we have sufficient stock in our godown, the rate falls slightly,” he said. The sub-brokers make a profit of Rs.100 to Rs.150 per unit, while selling to the retailers. The sub-broker has a choice of selling the cylinders directly to the customer, and make another Rs.100, or pass it on to the black market retailers at half the profit. Some of the biggest sub-brokers in the LPG black market are based in Arjun Nagar, Bhim Nagar, Sikanderpur and Nathupur. Sources said they have made godowns in residential areas for easy delivery. There are many pockets in Gurgaon where this illegal business is mushrooming now. Sub-brokers generally target industrial places, where migrant labourers live in large numbers. Areas such as Khandsa, Badshahpur, Begampur Khatola, Naurangpur and Kadipur have a large number of industrial plants and a sizeable population of labourers.

“Black marketing can be divided into three parts, and almost in all cities, these statistics remain the same. 70 per cent of the black marketing happens in the filling of small cylinders. The cylinders of 2 kg, 4 kg, and even 10 kg come under this category, and mostly the labourers, who are in large numbers in any city, are the prime customers for this kind of arrangement. 20 per cent of the cylinders sold in the black market are consumed in hotels or the dhaba industry, as these people need cylinders on a daily basis – their consumption is very high. And the remaining ten per cent of the black marketing happens at the level of the general customer, who buys gas for his household,” added the owner.

Modus Operandi

Black marketing, or corruption, in the field of LPG begins the moment an agency gets cylinders from the main plant of any big company. As per the law, an agency should only get the cylinders according to the number the connections it has; but like the PDS depot, here too the agency owners get triple or even four times the numbers of cylinders that they are entitled to. This is the first step in this sordid business of black marketing. “Black marketing can be divided into four parts: at the plant, at the agency, at the vendor and at the sub-vendor. The general public pays for all this expenditure. When an agency goes to the plant to buy cylinders, it will get a legal cylinder (for which the agency has a connection), at the rate of around Rs. 400. This would be given to a customer (under subsidy) at the rate of Rs. 416. But the cylinder which is bought ‘extra’ by the agency would cost a buyer around Rs. 700 to 900. The agency sells cylinders in bulk to the vendor, who usually is an influential person having a hidden godown, at the rate of around Rs. 700. And then sub-vendors, such as small shop owners, buy the cylinder from this vendor at an inflated rate of Rs. 900 or Rs. 1,000; and by the time it reaches the customer, it usually touches a price of Rs. 1,200 to Rs. 1,500. It depends on the demand and supply. In Gurgaon, the agencies are not in great numbers, and the real corruption happens at the levels of vendors and sub-vendors. Sub-vendors in particular do the lion’s share of black marketing, because they usually sell gas in kilos to the labourers who have small cylinders of 2, 3 or five kilograms” he added.

The Masses Pay the Price

We hear every now and then that customers don’t get their cylinders because the dealer, instead of delivering their cylinder, sells it in the black market. It happens frequently. Earlier, when people had multiple connections, it did not bother them much. But now, since the government has allowed a family to have only one connection, the customers are very aware and agitated. Sucheta Singh, resident of Sector 56, says there is a huge backlog in supply, which is a sign of black-marketing by the agencies. “Now the government has decided to cancel the extra connections, and consumers can have only one connection. Therefore, customers are left at the mercy of a single dealer; and in one out of three or four times, the dealer indulges in black marketing. This leaves customers with no fuel. The only option is to buy a cylinder from the black market,” she added. Another consumer said, “The consumption goes up during the festive season every year, and the consumers are used to it. But every family is not capable of buying the cylinders in black. Hence they have to cut their budget for other things, to buy fuel for the celebrations. Black market is such a sordid business here that one can get a cylinder in half an hour anywhere in Gurgaon, whereas it takes days for a cylinder to come when we buy as per our connection.”

The agency dealer, however, believes that it’s not possible for any dealer to sell anybody’s cylinder in the black market. “It’s not possible that we can sell cylinders bought by a customer on his connection to somebody else in the black market, because if the same customer registers a complaint with the company, we would be in a soup. Actually, earlier people used to have multiple connections and that’s why there used to an opportunity for the dealers to sell a customer’s cylinder in the black market; but things have changed, and one customer can only have one connection, and this leaves us with no opportunity for any foul play. Actually now it happens at a different level. Every customer is entitled to a cylinder after 21 days, but most of the customers don’t buy it in that frequency because their cylinder takes more than a month to empty; and in a city like Gurgaon, where people often eat outside, this time span increases. Therefore the dealer, who gets a certain amount of cylinders for the number of connections from the company, sells off many cylinders in the black market. When some customer asks for his cylinder ‘earlier’ than anticipated, the dealer is unable to supply. It gets delivered after a short delay of two-three days,” explained the owner.

Is the Increased Cap Enough?

The Government might claim that it has given a great respite to the masses by increasing the cap of subsidised cylinders from six to nine, but are nine cylinders enough for the whole year? Do people have the extra money to buy the tenth cylinder? “Actually it depends on the size of the family and their culinary habits. If the family is small, and they just eat two time meals, with a limited extra cooking for tea and snacks, I think nine cylinders would be fine,” said Jaswant Singh Thakran, a Sector-39 resident. “In a year we have many family gatherings, along with other big and small celebrations such as birthdays etc. So nine cylinders are not sufficient. If the government wanted to reduce the subsidy on LPG, it could have managed by only reducing the connections to one for each family. Today 21 days are given by the government for one cylinder, and only after this time span can a family be entitled to get another cylinder. If this formula is taken into consideration, the government only gives us the subsidised LPG for 189 days – and for the rest 176 days we will have to pay thrice the money we were earlier paying. This is complete injustice,” said Ashok Kajla, a PG and guest house owner who spends a great amount of money on this fuel alone. Dealers, however, believe that the cap of nine is more than sufficient if a family runs the household carefully. “Usually a family of four or five people can manage with a cylinder for 40, or at least 35 days; which means that they will have to buy one, or at most two, cylinders at the inflated rate. As far as the poor and not so well off are concerned, they manage with one cylinder for two months, and nine cylinders are more than sufficient for them,” said a dealer.

The Route of Corruption

Step 1: Pilferage of LPG cylinders begins at the level of delivery agents

Step 2: Vendors sell them to sub-brokers for Rs. 800 to Rs. 900.

Step 3: Sub-brokers sell them to black market retailers at a profit of Rs. 100 to 150.

Step 4: Customers buy the cylinders from the black market for Rs. 1,200 to 1500 each – three times the normal price.